RCA

1TL200: A Magnavox Odyssey

In June 1967, Ralph Baer received permission from the leadership of Sanders Associates to complete his TV game prototype and bring it to market.  While this represented a significant milestone for Baer, however, there was still a great deal of work to be done.  At this point in his life, Baer was not a particularly accomplished game designer, and he felt his prototype did not offer the level of entertainment value necessary to justify its price.  Development on the project almost stalled completely until the addition of a new team member that lobbied for generating a third dot on the television screen, which finally led to the addictive game the system needed.

Even after the team overcame all the design hurdles, however, there was still the matter of introducing the system to the general public.  As a defense contractor, Sanders did not have any of the retail experience or clout necessary to produce a consumer product and would therefore need a partner to place Baer’s system on store shelves.  After multiple deals fell through at the last minute, Baer finally enticed Magnavox to build his TV game, and the long journey that began on a bus terminal step in August 1966 ended in September 1972 with the debut of the first home video game system, the Magnavox Odyssey.

As in the previous entry, there is little controversy regarding the design and development of Ralph Baer’s “Brown Box” prototype and its final incarnation, the Odyssey, due to Ralph Baer keeping meticulous records of the project and preserving them for posterity.  There is, however, considerable confusion over the success — or lack thereof — of Odyssey in the marketplace.  In this post, I will attempt to untangle the contradictory evidence of the Odyssey’s market performance and place it in the context of early video game history.

Three Spots

Harrison and Rusch

Bill Harrison (l) and Bill Rusch, the men who built Baer’s video game prototypes

In the aftermath of the successful demonstration of TV Game #2 to Royden Sanders and other company executives in late June 1967, Ralph Baer turned his attention toward refining his system into a viable commercial product.  According to his autobiographical work, Videogames: In the Beginning, Baer hoped to create a relatively cheap game, setting a target price of $25.00 for the complete package.  This meant refocusing the system around what Baer considered the best ideas he and Harrison had developed in order to reduce the part count.  Harrison removed the pumping game mechanic, which despite being the first game implemented had never been particularly fun, as well as the specialized circuits that allowed for color graphics and the placement of additional dots on the screen through a random number generator.  By August 1967, Harrison had completed his scaled-down version of the system, dubbed TV Game #3, which now only played chase and shooting games.  Unfortunately, despite cutting as many corners as they possibly could, Baer and Harrison were unable to come near their target price: the system they built would have to sell for a minimum of $50.00 at retail.  Baer felt his simple chase and light gun games did not provide nearly enough entertainment value to justify that price, so he put the color circuitry back into the system and tried to develop additional game concepts.  When he proved unable to find a way to make the system more interesting, Campman, who sensed Baer had hit a wall in development, decided to loan Baer his former brainstorming partner, the creative engineer Bill Rusch.  On August 18, 1967, Rusch formally became the third member of the Sanders TV game team.

According to both Ralph Baer and Bill Harrison, Bill Rusch was not the easiest person to work with.  In an interview by Benj Edwards, Harrison called Rusch “very different” and “a colorful character,” while Baer lamented to Tristan Donovan that he would show up late, putz around for an hour before turning to the task at hand, take a two hour lunch, and generally spend as little time as possible actually working.  As Baer told Kent in The Ultimate History of Video Games, he was so desperate to motivate the frustrating engineer that he let him work on a pet project involving changing the octave of notes played on a guitar in addition to the TV game project.  Despite these difficulties, however, there was no doubting Rusch’s intelligence or creativity.  Indeed, soon after joining Rusch proved his value by proposing the idea that saved the entire project: adding a third, machine-controlled dot to serve as a ball for use in a game of ping pong. (Note: Kent states that Rusch implemented the chase game on the system as well, although this was already completed by the time he joined the team.  Chase games were one of several concepts in Rusch’s May game memo, however, which may be the source of Kent’s confusion.)

According to Videogames: In the Beginning, Harrison and Rusch spent October 1967 making the new three spot system a reality, which became TV Game #4.  While Harrison built the new system, Rusch spent the majority of his time designing advanced circuits that would allow for the generation of round spots instead of squares and allow the speed and direction of the ball spot to vary based on the velocity of the impact with a player-controlled spot.  Ultimately, however, neither of these features were incorporated, the former because it remained buggy and the latter because Baer felt they did not have time to complete it.  This led to considerable friction between Baer and Rusch, who did not appreciate Baer telling him what could and could not be incorporated into the system.  Nevertheless, by November 1967 the team had a video game unit that could play ping pong, chase, and shooting games with three controllers: a light gun for target shooting, joysticks for the chase game, and a three dial control for ping pong that controlled the horizontal and vertical movement of the player’s paddle and allowed the player to manipulate the ball to put a little “English” on it.  After another demo for Campman, the R&D director concurred with Baer that the system finally contained enough interesting gameplay variants to be worth selling, so Baer turned his attention to finding a retail partner.

Baer turned first to the fledgling cable industry.  At the time, there were no dedicated cable channels, so cable TV was basically just an expensive way to receive the exact same channels that a person could already get for free over the air.  While cable eliminated the need to adjust antenna to improve the quality of a broadcast signal, unless a person lived in the mountains or in a similar environment where reception was exceptionally poor, this convenience did not justify the cost.  As a result, the cable industry was struggling, and Baer felt that a novel product like a TV game could be just the thing for the industry to break out of its slump.  He therefore had Harrison modify the game so that it could accept background graphics transmitted by a cable signal and contacted the largest cable provider, TelePrompter, which supplied roughly 60,000 subscribers at that time.  The idea was that the cable company could point a camera at a highly detailed view of a tennis court or some other venue which would be broadcast to the TV game to provide a background for the action.  The spots generated by the hardware would then be superimposed on top.  TelePrompter expressed interest, and negotiations proceeded on and off between January and April 1968.  While the cable company thought the game a good idea, however, an economic recession ultimately left it in an untenable financial situation, and it could not afford to develop the product.  Baer would need to find another partner.

Brown Box

brown box

The “Brown Box” prototype

In December 1967 and January 1968, Harrison continued to work on improving the TV game, incorporating some of the velocity circuitry designed by Rusch and re-implementing the light pen quiz game with a new light gun peripheral that would allow answers to be chosen from a distance.  In this game, four answers would appear on the screen with dots next to them.  The dots would all blink rapidly, with the dot next to the correct answer blinking in a different pattern than the others.  This was all imperceptible to the naked eye, but the light pen would respond differently to the correct and incorrect dots in order to determine if the player answered correctly.  Two new ball-and-paddle variants were created during this time period as well, handball and volleyball.  In handball, the “net” was moved to one side of the screen and served as the wall of a handball court, while in volleyball, the centerline was modified to serve as a net.  Otherwise, the gameplay remained the same as in the ping-pong game.  Work on TV Game #5 ceased at the end of January when funding ran out.  The same recession affecting TelePromper also hit Sanders hard, and the company scaled down from 11,000 employees to just 4,000 during this period.  This marked the end of Bill Rusch’s short, but productive time on the project.

In September 1968, Baer secured additional funding and brought back Bill Harrison to create another prototype, TV Game #6.  The switches used to select different game modes in previous versions were replaced with a rotary dial, while the game also sported an improved light gun.  Still feeling they could do a little better, Baer and Harrison developed one final prototype in January 1969, TV Game #7, which they also called the “Brown Box” because Harrison wrapped the casing in self-adhesive woodgrain to make it more attractive.  This version also included an expanded set of games.  In addition to Ping-Pong, Handball, Volleyball, Target Shooting, and the Checker chase game, there were now Hockey, Soccer, and Football variants of the ball and paddle game, which featured the same basic game play with different overlays, and a golf putting game with a new peripheral: a golf ball mounted on  a joystick.  The player would place the joystick on the floor and tap the ball with a putter, after which the spot representing the ball would move based on the contact with the joystick.  If the ball hit the dot representing the hole, they both disappeared.  A final attempt was made to add Rusch’s velocity circuit to this version as an add on, which was dubbed TV Game #8, but it was ultimately left out due to cost.

By the end of 1968, Baer and Harrison had essentially finished the Brown Box, but they were no closer to selling it.  Finally, the Sanders patent attorney, Lou Etlinger, provided the solution: approach the television manufacturers.  These firms were already using the exact same components contained within the Brown Box in their TV sets, so ramping up manufacturing would be relatively simple.  Additionally, the TV companies would most likely be interested in anything that could spur television sales.  One by one, Etlinger invited some of the most prominent TV manufacturers — RCA, Zenith, Sylvania, General Electric, Motorola, Warwick, and Magnavox — to view the Brown Box in action.  While many of these companies showed some interest, however, Baer and Etlinger were never able to close a deal.  Warwick, the manufacturer of televisions sold by Sears, was impressed and told Sanders to contact the buyer at the department store, but the executive refused to sell the product in his stores, afraid parents would drop their kids off in the electronics department to play the games and transform Sears into a glorified babysitter.  The General Electric engineers were likewise impressed and helped set up a meeting at the company’s small-color-set assembly facility in Virginia, but nothing ever came of it.

The first company to view the system, RCA, ultimately proved the most enthusiastic.  Coming to Nashua in January 1969, RCA liked the system so much that it started negotiating a licensing agreement with Sanders in the Spring.  An agreement was hammered out after several months of negotiations, but Sanders ultimately backed out of the deal.  Baer has never specified the exact reasons Sanders did not like the final agreement, only calling the terms “onerous,” but RCA probably either wanted to completely own the technology and the patents behind it or offered a paltry royalty deal.  Sanders appeared out of options at this point, but luckily one of the RCA negotiators, Bill Enders, remained highly enthusiastic about the product, so when he left RCA to join Magnavox, he urged his new employer to take another look at the system.

Magnavox

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Edwin Pridham (l) and Peter Jensen, two of the founders of the company that formed the core of Magnavox

The Magnavox Corporation traces its history to a partnership formally established on March 1, 1911, called the Commercial Wireless and Development Company that brought together three individuals, Danish electrical engineer Peter Jensen, Stanford-trained electrical engineer Edwin Pridham, and San Francisco financier Richard O’Connor.  According to The Early History of Magnavox by Billy Malone, Jensen, born in 1886, was a brilliant student forced to forego university and take a job at a sawmill upon the death of his father.  The superintendent of the mill encouraged him to find a job more suited to his academic abilities, however, and in 1903 he was able to secure a position in the laboratory of Valdemar Poulsen, the Danish inventor of the Telegraphone, the first magnetic wire recording apparatus, the predecessor of magnetic tape recording.  In this capacity, Jensen helped Poulson develop his continuous wave arc transmitter, one of the key technologies that allowed for practical radio broadcasting.  In 1909, Jensen came to Palo Alto, California, which even before forming the heart of Silicon Valley was an important hub for wireless research, to grow the Poulsen Wireless and Telegraph Company, formed in October of that year in partnership with Stanford engineer Cyril Elwell and investor John Coburn.

While at the company, Jensen met Pridham, a fellow employee originally hailing from Maywood, Illinois, who helped him learn English and assimilate into American culture.  He was also introduced by Coburn to O’Conner, an investor in the new venture frustrated that he had no say in company affairs.  Coburn proposed that O’Connor travel to Denmark to secure patent rights from Poulsen to start his own company and suggested Jensen resign his position and join the negotiating team.  Jensen agreed on the condition that Pridham be allowed to join them as well.  Although the Danish trip was unsuccessful, O’Connor pressed forward with his plan to establish the Commercial Wireless and Development Company with Jensen and Pridham in 1911.

Once their new company was established, Jensen and Pridham turned their attention to developing a more sensitive telephone that could pick up signals transmitted from a greater distance.  According to an article hosted on the website of the Audio Engineering Society entitled “Peter L. Jensen and the Magnavox Loudspeaker,”, the result of this research was an improved version of the Poulsen arc radio transmitter featuring thicker wires connected to a diaphragm and a coil of copper wire placed between magnets.  Driving a current though the coil produces a magnetic field that causes the coil to move back and forth rapidly.  This causes the coil to push against the diaphragm, thus converting the electrical signal into soundwaves.  Per The Early History of Magnavox, this resulted in a telephone with much clearer sound, but AT&T chose not to adopt the “dynamic telephone” because they were already partnering with Lee DeForest to use his audion tube in their equipment, and the Jensen system was too large and bulky to be practical.

In 1915, a blacksmith named Ray Galbreath visited Jensen’s lab.  An avid baseball fan, he lamented that he often had difficulty hearing announcements made at the ballpark and thought the dynamic telephone could be used to amplify the announcer.  This suggestion caused Jensen to shift his focus from improving the clarity of sound over a long distance to increasing the volume of sound over a shorter distance.  After several months of work, Jensen publicly demonstrated the first loudspeaker public address system in San Francisco on December 10, 1915.  He decided to name the system after the Latin term for “great voice,” Magnavox.

In 1916, Jensen, hoping to find a mass market application for the new loudspeaker, developed an all-electric phonograph incorporating loudspeaker amplification.  A demonstration was arranged for the largest phonograph company, Victor Corporation, but they were not interested.  Victor’s main competitor, Columbia, also turned them down.  As Jensen and company continued to refine their player, however, they purchased large quantities of records from the Sonora Phonograph Distributorship Company, which attracted the attention of its president, Frank Steers.  Steers saw the potential of the electric phonograph and arranged a merger between Sonora and Commercial Wireless to manufacture the device.  On July 6, 1917, the combined company incorporated under the name Magnavox.  At the time, PA systems remained an integral part of the company’s business, but according to the AES article AT&T came to dominate this market in the 1920s, so Magnavox shifted its primary focus to phonographs and radio.  According to Malone, the company moved its headquarters to Emeryville, California, in 1927, and then consolidated its various facilities in Fort Wayne, Indiana, in 1930.  According to an oral history with former Mangavox employee Arthur Stern, the Great Depression nearly killed the company, which barely avoided bankruptcy in the late 1930s, but the onset of World War II and lucrative military contracts for electronic equipment saved it.  After the war, Magnavox entered the television business, and it remained a major player in the field in the early 1970s, when Ralph Baer and Lou Etlinger approached the firm to license the first home video game system.

Building Odyssey

Odyssey Motherboard

The motherboard of the Odyssey

According to Baer’s book, in July 1969, Bill Enders, recently relocated from RCA to Magnavox, returned to Nashua for a personal demonstration of the Brown Box.  Still impressed with the technology, he began heavily lobbying his superiors to license the product.  This campaign culminated in a demonstration of the technology at Magnavox headquarters in Fort Wayne on July 17, 1969, for Gerry Martin, the VP of the Magnavox Console Products Planning Division.  Martin was immediately taken with the technology, though it would take him months of lobbying with Magnavox corporate before he was finally authorized to negotiate a deal in March 1970.  Nearly a year of negotiations followed, culminating in a preliminary licensing agreement between Sanders and Magnavox in January 1971.

With a license agreement in place, further development of the Brown Box — known within Magnavox by the product designation 1TL200 — shifted from Baer’s lab at Sanders to a team of Magnavox engineers in Fort Wayne led by George Kent.  While Baer and Harrison would consult with these engineers from time to time, their active role in the development of the video game was now over.  At Magnavox, management placed a great emphasis on reducing the cost of the system as much as possible, ultimately leading to the removal of the chroma circuitry for generating color backgrounds, the golf putting game, and any chance of including the pumping and quiz game functionality that Baer and Harrison had already stripped out of earlier prototypes of the system.  They also chose to move away from switches or dials to select games by including a group of plug-in circuit cards instead that would unlock individual games.  This last innovation has led some to label the system the first cartridge system, though this comparison is not apt.  There was no memory or game code on these cards, which merely complete different circuit paths within the hardware itself to define the rule set for the current game.  All of the game information was contained in the dedicated hardware, and inserting a new circuit card was really no different an act from flicking a toggle switch.

Initially, the video game project was placed under the control of Bob Wiles, the product manager for color TVs, but it was soon placed in its own product category.  The man ultimately responsible for bringing the Odyssey to market was a product manager named Bob Fritsche, a 1966 graduate of Miami University of Ohio with a degree in marketing who joined the Air Force right out of school, mustered out in October 1970 at the rank of captain, and subsequently joined Magnavox.  According to court testimony delivered by Fritsche in December 1976 during the case of Magnavox v. Chicago Dynamic Industries and Seeburg Corporation, he started in the purchasing department before becoming the first product planner on the video game system in September 1971.  At the time, Magnavox had just begun performing consumer playtest and marketing surveys using prototype hardware of what was now being called “Skill-O-Vision.”  The first, conducted in Los Angeles, proved highly successful, so a second survey was scheduled for Grand Rapids, Michigan, to gauge the response in a more technologically conservative part of the country.  According to Fritsche, this test proved highly successful as well.  Indeed, original market projections had called for an extremely limited production runs of 50,000 units for the first holiday season, but based on the marketing surveys, Fritsche argued that they should build 100,000 units instead.  In order to insure Magnavox dealers across the country had sufficient stock to meet market demand, the company decided to release it in only eighteen major markets, one metropolitan area in each of its 18 sales territories nationwide.

According to Fritsche, Magnavox unveiled the final version of the system, now dubbed the Magnavox Odyssey — a name whose origin has been lost to time — to its authorized dealers for the first time in May 1972 in Las Vegas.  Soon after, the product was formally introduced to the press at an event hosted by Tavern on the Green in New York City (according to Baer, this event occurred on May 22, though he mistakenly calls the restaurant “Bowling Greene”).  Over the next few months, Magnavox took the product on the road, hosting shows in roughly 16 cities to allow their dealers and other interested industry parties to familiarize themselves with the product.  When exactly the system first went on sale is not known.  According to Fritsche, Magnavox started shipping the system in mid September.  Frank Cifaldi claims in an article on Gamasutra that the system was available as early as August 28 based on an ad in the Edwardsville Intelligencier, but this add merely invites people to “See Odyssey” and contains no language implying that the system is actually available for purchase.  Most likely this was a preview event in anticipation of the product arriving in the next month.

The System

Odyssey

The complete Odyssey package, including overlays and accessories

The Magnavox Odyssey hit store shelves at a suggested retail price of $99.99, roughly double what Baer had originally planned.  The system shipped with 12 games unlocked by six circuit cards, most of which were variations on the ball and paddle and chase games that Baer, Harrison, and Rusch had developed at Sanders.  The system remained capable of generating only two player-controlled dots plus one machine controlled dot and a single line of varying height, so all of the game mechanics were based around moving dots around the screen.  Each game required a plastic overlay, which would cling to the TV through static electricity to provide background graphics and other game features.  Additionally, the system shipped with cards, play money, and dice to provide additional play mechanics.  According to an interview with artist Ron Bradford, all of the final game designs — as well as the overlays and packaging materials for the system — were done on a contract basis by his firm, Bradford/Cout Design, which had previously done creative work for Magnavox’s ad agency.  Bradford developed the games in conjunction with Steve Lehner at the agency.

While Baer had developed several different control schemes for different types of games, the final system only shipped with one: the three dial control that allowed the player to move his dot horizontally or vertically as well as exert a small amount of control over the machine-controlled dot.  The controller also contains a reset button, which is not used to reboot the console, but rather to reset certain game elements during play.  Two additional controls are present on the main unit: a dial to adjust the position of the center line on the screen and a dial to set the speed of the machine-controlled dot.  While many sources, most notably Kent, claim the internals were analog, the system was constructed using digital logic circuits.  As Baer explains in his book, however, these were not the cutting edge transistor-to-transistor logic (TTL) circuits becoming increasingly common in the early 1970s.  Instead, the system used more primitive diode-to-transistor logic (DTL) to keep down the cost of the hardware.  The twelve games that shipped with the system are as follows:

Table Tennis (Game Card #1): Each player controls a paddle and they knock a ball back and forth across the screen.  The only game that does not require an overlay or any other additional elements.  Score is not tracked by the game and must be recorded manually.

Ski (Game Card #2): A timed racing game.  The overlay provides several different paths and includes pictures of obstacles like trees and mountains.  The player navigates his dot along the path and takes a penalty defined by the instructions any time he goes off the path and hits an obstacle.  Players must keep track of their own time using a clock or stopwatch.

Simon Says (Game Card #2): A three-player variation on the classic children’s game.  The overlay depicts a boy and a girl, each of which is claimed by one player.  The third player draws from a deck of 28 “simon says cards” that each depict a part of the body.  Each time a card is drawn, the players must move their spots to the proper body part on their person.  Whoever gets there first wins the card.  If there is a tie, the card is returned to the bottom of the deck.  Players only move if the card drawer uses the phrase “simon says.”  If they move when the phrase is not used, they have to return a card to the deck.  The player with the most cards at the end wins.

Tennis (Game Card #3): Plays essentially the same as the Table Tennis game except there is an overlay on the screen depicting a tennis court and service must follow the rules of tennis (i.e. in order for a serve to be “good” it must land in the other player’s “service box”).

Analogic (Game Card #3): An arithmetic game presented with the conceit that it takes place in a “numeric maze of a computer-charted galaxy.”  The overlay consists of a grid in which each square has a number.  Players start on opposite ends of the screen on “Planet Odd” and “Planet Even.”  The former player can only move to a square containing an odd number, while the latter player can only move to a square containing an even number.  After the first turn, a player may move to any square containing a number that corresponds to the sum of the other player’s last move and any other number so long as the sum results in an odd number for the Planet Odd player or an even number for the Planet Even player.  The first player to reach the opposing player’s planet wins.

Hockey (Game Card #3): Again like Table Tennis except the overlay is a hockey rink.  A player scores if the dot touches the opponent’s goal on the overlay.

Football (Game Card#3 and Game Card #4): Easily the most complicated game.  Uses a combination of on-screen maneuvering, dice, and “play cards” to simulate a game of football.  The kickoff as well as passing and punting plays use the ball spot and are done with Card #3.  Running plays use only the two player spots and are executed with Card #4.  Full rules can be viewed at a page hosted by the University of Waterloo that is dedicated to the Odyssey.

Cat and Mouse (Game Card #4): A chase game played on a grid.  The mouse must return to the square designated as his “house” without being caught by the cat.  The players get a varying number of points depending on where the mouse is caught.

Haunted House (Game Card #4): Another chase game with a haunted house overlay.  One player is a “detective,” while the other is a “ghost.”  The overlay contains “clue” spaces that the detective must traverse in the order determined by a deck of clue cards, but if he passes over a window on his way to a clue, he forfeits the card.  At the beginning of the game, the ghost also picks a clue space to place his ghost.  When the detective approaches that space, the ghost player hits the reset button to reveal his spot.  After that point, the detective must avoid making the ghost spot disappear or he forfeits half his clue cards.

Submarine (Game Card #5): A target shooting game played with an overlay showing various shipping lanes.  One player navigates his spot along the lanes.  The other player uses the reset button to launch the machine-controlled dot, which represents a torpedo.  The players take turns in the roles, and whoever sinks more ships wins.

Rouelette (Game Card #6): A game of chance played with a roulette wheel overlay.  Bets are placed using chips and a number board that come with the system.  After bets are placed, a player randomly turns the control dials and then presses reset to launch the ball on the roulette wheel.

States (Game Card #6): An educational game played with an overlay of the United States and a deck of fifty cards — one per state — with trivia questions about that state.  Players use the controller to select a state and answer questions to gain control of cards.  The player with the most cards at the end wins.

Six more games were sold separately, most of which just provided new overlays and instructions for use with the circuit cards that shipped with the game.  These were available for $5.49 each or in a pack of all six for $24.99.  The games are as follows:

Fun Zoo (Game Card #2): A racing game for three players using an overlay of a zoo.  The zookeeper draws an animal from a deck of cards, and the other two players see who can reach it first.

Baseball (Game Card #3):  Like Football, this is a complicated game that uses a combination of cards, dice, and tokens.  The players on each side have some basic statistics determined by rolling dice.  Full rules can be viewed on the Internet Archive.

Invasion (Game Card #4, Game Card #5, and Game Card #6): Another complicated game in which strategic moves are made on a separate game board and tactical combat is resolved on the screen.  Different kinds of assaults require different circuit cards.  Full instructions at the Internet Archive.

Wipeout (Game Card #5): A racing game using both a track overlay and a game board.  Player laps are completed by maneuvering a dot around the screen.  The second player dot and the machine-controlled dot serve as a primitive timer, with the machine dot moving across the screen and then bouncing back when it hits the second player dot, which remains in a fixed position.  Laps are tracked on the game board.  Players take turns racing, and the first to pass the finish line on the board wins.

Volleyball (Game Card #7): A ball-and-paddle variant with a volleyball court overlay.  The players must use the English control to arc the ball over the net.

Handball (Game Card #8): Another ball-and-paddle variant with a handball court overlay.  Both players are on the same side of the screen and hit the ball to the white line, which acts as a wall.

Additionally, the light gun developed by Harrison was released as a separate accessory that came with four games using two additional game cards and sold for $24.99.  The games are:

Prehitoric Safari (Game Card #9): The overlay features ten different targets.  One player lines up the dot on a target, which the other player tries to hit with a single shot.  Each player takes fifteen shots, and the one with the most hits wins.  A variant gives different point values for different targets.

Dogfight! (Game Card #9): The overlay features a flight path.  One player maneuvers the dot along the path, while the other attempts to shoot it.

Shootout! (Game Card #9): The player-controlled spot is an outlaw that must traverse a set path through a western town overlay, pausing at each window long enough to give the other player a chance to shoot him.

Shooting Gallery (Game Card #10): The overlay contains several rows of standard shooting gallery targets.  The player-controlled spots are placed at either end of the first row of targets, and the machine-controlled spot then moves back and forth between them as the player tries to shoot it.  After ten passes, the sequence is repeated with the next row of targets.  Whoever has the most hits after taking shots at every row of targets wins.

One final game created for the system was held back and given out free to players that mailed in a survey card packaged with the system.  This game, called Percepts, used Game Card #2 and is another racing game in which the overlay contains squares with patterns and symbols on the them.  The players must race to the proper square when a card containing that pattern or symbol is drawn.

Market Performance

Magnavox_Odyssey_Game_Tennis_small

The Odyssey Tennis Game, complete with overlay

The Odyssey initially launched in 25 markets in September 1972, seven more than originally planned.  According to Fritsche’s testimony, Magnavox expended considerable effort to increase production capacity and build additional systems based on the favorable feedback gathered during the marketing surveys.  Rather than making these systems available to retailers generally, distribution was restricted to the Magnavox network of dealers that sold the company’s products exclusively.  According to Fritsche, this decision was made by a senior marketing VP who felt that since the Odyssey would be the world’s first video game system, it would draw customers to Magnavox dealers and therefore present an opportunity to sell them a full range of Magnavox products.  Indeed, while the suggested retail price of the system was $99.99, when purchased in conjunction with a Magnavox television set, the price fell to just $50.00.

According to Baer, the launch of Odyssey was supported by a national advertising campaign featuring glossy sales flyers, in-store displays, and national television and radio ads.  A video available at the Pong Story website also shows that the Odyssey was demonstrated on the popular game show What’s My Line? in 1972.  Baer claims that the television commercials featured Frank Sinatra, but no video has surfaced of a Sinatra-led advertisement.  In fact, the only ad that has been discovered, which was on the air by early 1973 at the latest, only features two adults playing several of the games available for the system.  The September 29, 1973 edition of Billboard, however, reported that Magnavox had just negotiated a deal to sponsor a Sinatra television special to promote its consumer products line.  I believe that in this case, Baer is confusing this television special and the associated ad campaigns with Magnavox’s 1972 advertising campaign and that there were no Sinatra-led commercials for the system at launch.

According to Baer, Magnavox ultimately produced 140,100 Odyssey systems in the first year, far more than the originally projected 50,000.  Don Emry, an assistant product planner that joined the Odyssey team in Janaury 1973 after working on the technical documentation for the system the previous year, stated in an interview with the Digital Press that he believes most of the numbers Baer reported are a little high, and he recalls the original production run being closer to 120,000.  Either way, according to Fritsche’s testimony, Magnavox only sold 69,000 units in the first holiday season (he initially says 89,000, but corrects himself during cross-examination), and Emry remembers the warehouse was still full of systems in early 1973.

Why did the system sell so poorly in the first season?  While impossible to say for certain, a number of factors have been identified.  Baer believes price was a major factor, as $100, equivalent to $569 today, represented a significant investment in a new and unproven technology that offered relatively limited game play.  He also points to the limited distribution to Magnavox dealers as a factor, and Fritsche relates in his court testimony that he would have liked broader distribution but was overruled by marketing.  Baer also claims that Magnavox dealers were not properly trained in pushing the additional cartridges, which often remained under the counter unsold.

Baer further believes that Magnavox’s television ads confused customers into thinking the system only worked on a Magnavox television set, but the 1973 ad clearly states that the game will work with any television regardless of brand.  Its possible that an earlier ad in 1972 resulted in confusion and led to a revised ad being aired early the next year, but since no other Odyssey ads from the period have surfaced, this cannot be verified.  Even if Baer is wrong on this point, however, the system was only purchasable from Magnavox dealers as part of a marketing strategy to sell Magnavox TV sets, so even if the ads were not ambiguous, many consumers may well have been left with the impression that the system only worked on Mangavox TVs when they saw it at retail.  In his interview with Digital Press, Emry states that he does not believe Magnavox had an official policy of implying exclusivity, but he concedes its possible that certain dealers could have marketed the system that way to benefit their own business.  Don Emry also points out that sales were actually in line with the original Magnavox projections, so the relatively poor performance of Odyssey in 1972 may have more to do with an over-excited marketing department ordering the production of more systems than the market could actually bear.

According to Baer, Magnavox management soured on the Odyssey after that first holiday season and considered liquidating the remaining stock and exiting the business altogether.  Ultimately, however, modest continuing demand by retailers for additional systems for the 1973 holiday season convinced the company to manufacture a small run of 27,000 additional systems to complement existing back stock.  The result, according to Fritsche’s testimony, was a modest sales improvement to 89,000 systems.  According to Baer, the system was also released internationally for the first time this year and was eventually available in twelve countries: Australia, Belgium, France, Germany, Greece, Israel, Italy, the Soviet Union, Spain, Switzerland, the United Kingdom, and Venezuela.  The international version removed five games (Cat & MouseFootballHaunted House, Roulette, and States) and replaced them with three games sold separately in the United States (SoccerVolleyball, and Wipeout).  (NOTE: According to Pong Story, the console was also released in Mexico) The company also authorized the release of four new games in 1973, two of which were started by the Bradford/Cout team and completed by Don Emry and two that Emry designed completely on his own.  The games were:

Brain Wave (Game Card #3): A complicated strategy game using cards and dice.  Full rules at the Internet Archive.

W.I.N. (Game Card #4):  Players must highlight letters, numbers, and symbols displayed on the overlay with their spot to fill out their “Win card” to win the game.  The player actually renders his dot invisible by touching the other dot on the screen and then has to guess where to move the dot before hitting the reset button to make it appear again.

Basketball (Game Card #8): Another ball-and-paddle variant played using a basketball court overlay.

Interplanetary Voyage (Game Card #12): Unlike other variants, the spot in this game has momentum, so it will continue to move after the player stops turning his dial.  The goal is to complete missions by guiding the spot to planets on the overlay based on instructions contained on mission cards.  The player has only so many “rocket blasts” to reach the planet.

 As reported in the September 22, 1973, of Billboard Magazine, Magnavox decided to stage a massive promotion of its 1974 consumer products line in late 1973 through an unprecedented $9 million advertising campaign highlighted by a sponsored television special featuring Frank Sinatra.  According to Billboard, all of Magnavox’s products benefited from the campaign, and according to Fritsche, sales of Odyssey reached 129,000 for the year (Note: Baer reports 150,000 for the year, but his numbers always appear to be high based on the recollections of others.  Interestingly, in 1975, Mechanix Illustrated stated Magnavox sold only 90,000 systems in 1974.  Magnavox did release the system in several European countries, so its possible that the 90,000 figure represents domestic sales, and the other 40,000 were sold overseas).  According to Baer, Magnavox discontinued the original Odyssey after 1975 and sold roughly 350,000 total systems.  Mechanix Illustrated states that Magnavox planned to sell 100,000 systems in 1975, yet Fritsche, who left Magnavox in the middle of 1975, states that the company planned to sell 210,000 systems that year and was close to reaching that goal already when he left the company.  If his figures are accurate, Magnavox may have sold as many as 500,000 Odyssey systems (NOTE: The context of the testimony implies that these were projected sales of the original Odyssey only.  However, Magnavox did release the Odyssey 100 and Odyssey 200 in 1975 as well, so its possible this projection includes sales of these two systems, which would explain why it is abnormally high compared to other estimates.  Fritsche left the company before Magnavox began selling its newer systems, so it’s also possible that Magnavox cut its targets after he left, perhaps due to retailers cutting orders of the old system when they realized the new system would be a bigger hit.).  Either way, these represent fairly modest sales for a product on the market for four holiday seasons.

So can the system be considered a success?  Baer certainly thinks so, calling it successful on the strength of its sales alone, though he doubts it did much to help Mangnavox’s bottom line when factoring in production and advertising costs and the processing of roughly 40,000 product returns.  Both Bob Fritsche and Don Emry reported that the system was well received by the public, though Emry notes that the overproduction of the system hampered the ability of the Odyssey team to expand the product line.  Historical works tend to take a more negative view.  Kent considers it a failure, but he reports wildly inaccurate sales figures of only 100,000 units over the life of the console.  Phoenix author Leonard Herman also declares it a failure, while Harold Goldberg cites Baer’s sales and costs estimates in All Your Base Our Belong to Us to conclude that the system did not perform well.

In the end, the Magnavox Odyssey cannot really be considered a success.  Though it remained on the market for three years, sales remained modest, and Magnavox provided little support to the product team.  No new games were created after 1973, and according to Emry plans for both a cheaper version of the console with fewer games and a four-player variant had to be shelved when Magnavox declined to expand the product line.  Baer, too, noticed a lack of interest on the company’s part to improve the system: when he took it upon himself to create an add-on that would add sound to Odyssey games, it was turned down.

The console also failed to spur a larger adoption of video games in the home.  According to Pong Story, two consoles that largely cloned the Odyssey were manufactured in Europe, the Overkal in Spain in 1973 and the Kanal 34 in Sweden in 1975, while a clone called the Telematch appeared in Argentina, but these systems were produced only in extremely limited quantities.  No other company attempted to enter the home market until 1974, and home videos games did not really take off until 1975.  This boom resulted from better technology and the popularity of arcade games rather than any success on the part of Magnavox with the Odyssey.

Still, the Odyssey remains an important milestone for being the first designed and patented device that met the original technical definition of a video game, that is an interactive game played through use of a video signal transmitted to a television, as well as being the first video game system released for the home.  It also played a crucial role in the evolution of the video game industry greatly out of proportion to its commercial success after Nolan Bushnell and his cohorts at Syzygy Engineering built on Ralph Baer’s concepts to create the first video game to take the United States by storm: Pong.

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Historical Interlude: From the Mainframe to the Minicomputer Part 2, IBM and the Seven Dwarfs

The computer began life in the 1940s as a scientific device designed to perform complex calculations and solve difficult equations.  In the 1950s, the United States continued to fund scientific computing projects at government organizations, defense contractors, and universities, many of them based around the IAS architecture derived from the EDVAC and created by John von Neumann’s team at Princeton.  Some of the earliest for-profit computer companies emerged out of this scientific work such as the previously discussed Engineering Research Associates, the Hawthorne, California-based Computer Research Corporation, which spun out of a Northrup Aircraft project to build a computer for the Air Force in 1952, and the Pasadena-based ElectroData Corporation, which spun out of the Consolidated Engineering Corporation that same year.  All of these companies remained fairly small and did not sell many computers.

Instead, it was Remington Rand that identified the future path of computing when it launched the UNIVAC I, which was adopted by businesses to perform data processing.  Once corporate America understood the computer to be a capable business machine and not just an expensive calculator, a wide array of office equipment and electronics companies entered the computer industry in the mid 1950s, often buying out the pioneering computer startups to gain a foothold.  Remington Rand dominated this market at first, but as discussed previously, IBM soon vaulted ahead as it acquired computer design and manufacturing expertise participating in the SAGE project and unleashed its world-class sales and service organizations.  Remington Rand attempted to compensate by merging with Sperry Gyroscope, which had both a strong relationship with the military and a more robust sales force, to form Sperry Rand in 1955, but the company never seriously challenged IBM again.

While IBM maintained its lead in the computer industry, however, by the beginning of the 1960s the company faced threats to its dominance at both the low end and the high end of the market from innovative machines based around new technologies like the transistor.  Fearing these new challengers could significantly damage IBM, Tom Watson Jr. decided to bet the company on an expensive and technically complex project to offer a complete line of compatible computers that could not only be tailored to a customer’s individual’s needs, but could also be easily modified or upgraded as those needs changed over time.  This gamble paid off handsomely, and by 1970 IBM controlled well over seventy percent of the market, with most of the remainder split among a group of competitors dubbed the “seven dwarfs” due to their minuscule individual market shares.  In the process, IBM succeeded in transforming the computer from a luxury item only operated by the largest firms into a necessary business appliance as computers became an integral part of society.

Note: Yet again we have a historical interlude post that summarizes key events outside of the video game industry that nevertheless had a significant impact upon it.  The information in this post is largely drawn from Computer: A History of the Information Machine by Martin Campbell-Kelly and William Aspray, A History of Modern Computing by Paul Ceruzzi, Forbes Greatest Technology Stories: Inspiring Tales of the Entrepreneurs and Inventors Who Revolutionized Modern Business by Jeffrey Young, IBM’s Early Computers by Charles Bashe, Lyle Johnson, John Palmer, and Emerson Pugh. and Building IBM: Shaping an Industry and Its Technology by Emerson Pugh.

IBM Embraces the Transistor

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The IBM 1401, the first mainframe to sell over 10,000 units

Throughout most of its history in computers, IBM has been known more for evolution than revolution.  Rarely first with a new concept, IBM excelled at building designs based around proven technology and then turning its sales force loose to overwhelm the competition.  Occasionally, however, IBM engineers have produced important breakthroughs in computer design.  Perhaps none of these were more significant than the company’s invention of the disk drive.

On the earliest computers, mass data storage was accomplished through two primary methods: magnetic tape or magnetic drums.  Tape could hold a large amount of data for the time, but it could only be read serially, and it was a fragile medium.  Drums were more durable and had the added benefit of being random access — that is any point of data on the drum could be read at any time — but they were low capacity and expensive.  As early as the 1940s, J. Presper Eckert had explored using magnetic disks rather than drums, which would be cheaper and feature a greater storage capacity due to a larger surface area, but there were numerous technical hurdles that needed to be ironed out.  Foremost among these was the technology to read the disks.  A drum memory array used rigid read-write heads that could be readily secured, though at high cost.  A disk system required a more delicate stylus to read the drives, and the constant spinning of the disk created a high risk that the stylus would make contact with and damage it.

The team that finally solved these problems at IBM worked not at the primary R&D labs in Endicott or Poughkeepsie, but rather a relatively new facility in San Jose, California, led by IBM veteran Reynold Johnson that had been established in 1952 as an advanced technologies research center free of the influence of the IBM sales department, which had often shut down projects with no immediate practical use.  One of the lab’s first projects was to improve storage for IBM’s existing tabulating equipment.  This task fell to a team led by Arthur Critchlow, who decided based on customer feedback to develop a new random access solution that would allow IBM’s tabulators and low-end computers to not only be useful for data processing, but also for more complicated jobs like inventory management.  After testing a wide variety of memory solutions, Critchlow’s team settled on the magnetic disk as the only viable solution, partially inspired by a similar project at the National Bureau of Standards on which an article had been published in August 1952.

To solve the stylus problem on the drive, Critchlow’s team attached a compressor to the unit that would pump a thin layer of air between the disk and the head.  Later models would take advantage of a phenomenon known as the “boundry layer” in which the fast motion of the disks would generate the air cushion themselves.  After experimenting with a variety of head types and positions throughout 1953 and 1954, the team was ready to complete a final design.  Announced in 1956 as the Model 305 Disk Storage Unit and later renamed RAMAC (for Random Access Memory Accounting Machine), IBM’s first disk drive consisted of fifty 24-inch diameter aluminum disks rotating at 1200 rpm with a storage capacity of five million characters.  Marketed as an add-on to the IBM 650, RAMAC revolutionized data processing by eliminating the time consuming process of manually sorting information and provided the first compelling reason for small and mid-sized firms to embrace computers and eliminate electro-mechanical tabulating equipment entirely.

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The IBM 7090, the company’s first transistorized computer

In August 1958, IBM introduced its latest scientific computer, the IBM 709, which improved on the functionality of the IBM 704.  The 709 continued to depend on vacuum tubes, however, even as competitors were starting to bring the first transistorized computers to market.  While Tom Watson, Jr. and his director of engineering, Wally McDowell, were both excited by the possibilities of transistors from the moment they first learned about them and as early as 1950 charged Ralph Palmer’s Poughkeepsie laboratory to begin working with the devices, individual project managers continued to have the final authority in choosing what parts to use in their machines, and many of them continued to fall back on the more familiar vacuum tube.  In the end, Tom Watson, Jr. had to issue a company-wide mandate in October 1957 that transistors were to be incorporated into all new projects.  In the face of this resistance, Palmer felt that IBM needed a massive project to push its solid-state designs forward, something akin to what Project SAGE had done for IBM’s efforts with vacuum tubes and core memory.  He therefore teamed with Steve Dunwell, who had spent part of 1953 and 1954 in Washington D.C. assessing government computing requirements, to propose a high-speed computer tailored to the ever-increasing computational needs of the military-industrial complex.  A contract was eventually secured with the National Security Agency, and IBM approved “Project Stretch” in August 1955, which was formally established in January 1956 with Dunwell in charge.

Project Stretch experienced a long, difficult, and not completely successful development cycle, but it did achieve Palmer’s goals of greatly improving IBM’s solid-state capabilities, with particularly important innovations including a much faster core memory and a “drift transistor” that was faster than the surface-barrier transistor used in early solid-state computing projects like the TX-0.  As work on Stretch dragged on, however, these advances were first introduced commercially through another product.  In response to Sputnik, the United States Air Force quickly initiated a new Ballistic Missile Early Warning System (BMEWS) project that, like SAGE, would rely on a series of linked computers.  The Air Force mandated, however, that these computers incorporate transistors, so Palmer offered to build a transistorized version of the 709 to meet the project’s needs.  The resulting IBM 7090 Data Processing System, deployed in November 1959 as IBM’s first transistorized computer, provided a six-fold increase in performance over the 709 at only one-third additional cost.  In 1962,  an upgraded version dubbed the 7094 was released with a price of roughly $2 million.  Both computers were well-received, and IBM sold several hundred of them.

Despite the success of its mainframe computer business, IBM in 1960 still derived the majority of its sales from the traditional punched-card business.  While some larger organizations were drawn to the 702 and 705 business computers, their price kept them out of reach of the majority of IBM’s business customers.  Some of these organizations had embraced the low-cost 650 as a data processing solution, leading to over 800 installations of the computer by 1958, but it was actually more expensive and less reliable than IBM’s mainline 407 electric accounting machine.  The advent of the transistor, however, finally provided the opportunity for IBM to leave its tabulating business behind for good.

The impetus for a stored-program computer that could displace traditional tabulating machines initially came from Europe, where IBM did not sell its successful 407 due to import restrictions and high tooling costs.  In 1952, a competitor called the French Bull Company introduced a new calculating machine, the Bull Gamma 3, that used delay-line memory to provide greater storage capacity at a cheaper price than IBM’s electronic calculators and could be joined with a card reader to create a faster accounting machine than anything IBM offered in the European market.  Therefore, IBM’s French and German subsidiaries began lobbying for a new accounting machine to counter this threat.  This led to the launch of two projects in the mid-1950s: the modular accounting calculator (MAC) development project in Poughkeepsie that birthed the 608 electronic calculator and the expensive and relatively unsuccessful 7070 transistorized computer, and the Worldwide Accounting Machine (WWAM) project run out of France and Germany to create an improved traditional accounting machine for the European market.

While the WWAM project had been initiated in Europe, it was soon reassigned to Endicott when the European divisions proved unable to come up with an accounting machine that could meet IBM’s cost targets.  To solve this problem, Endicott engineer Francis Underwood proposed that a low-cost computer be developed instead.  Management approved this concept in early 1958 under the name SPACE — for Stored Program Accounting and Calculating Equipment — and formally announced the product in October 1959 as the IBM 1401 Data Processing System.  With a rental cost of only $2,500 a month (roughly equivalent to a purchase price of $150,000), the transitorized 1401 proved much faster and more reliable than an IBM 650 at a fraction of the cost and was only slightly more expensive than a mid-range 407 accounting machine setup.  More importantly, it shipped with a new chain printer that could output 600 lines per minute, far more than the 150 lines per minute produced by the 407, which relied on obsolete prewar technology.  First sold in 1960, IBM projected that it would sell roughly 1,000 1401 computers over its entire lifetime, but its combination of power and price proved irresistible, and by the end of 1961 over 2,000 machines had already been installed.  IBM would eventually deploy 12,000 1401 computers before it was officially withdrawn in 1971.  Powered by the success of the 1401, IBM’s computer sales finally equaled the sales of punch card products in 1962 and then quickly eclipsed them.  No computer model had ever approached the success of the 1401 before, and as IBM rode the machine to complete dominance of the mainframe industry in the early 1960s, the powder-blue casing of the machine soon inspired a new nickname for the company: Big Blue.

The Dwarfs

honeywell200

The Honeywell 200, which competed with IBM’s 1401 and threatened to destroy its low-end business

In the wake of Remington Rand’s success with the UNIVAC I, more than a dozen old-line firms flocked to the new market.  Companies like Monroe Calculating, Bendix, Royal, Underwood, and Philco rushed to provide computers to the business community, but one by one they fell by the wayside.  Of these firms, Philco probably stood the best chance of being successful due to its invention of the surface barrier transistor, but while its Transac S-1000 — which began life in 1955 as an NSA project called SOLO to build a transistorized version of the UNIVAC 1103 — and S-2000 computers were both capable machines, the company ultimately decided it could not keep up with the fast pace of technological development and abandoned the market like all the rest.  By 1960, only five established companies and one computer startup joined Sperry Rand in attempting to compete with IBM in the mainframe space.  While none of these firms ever succeeded in stealing much market share from Big Blue, most of them found their own product niches and deployed some capable machines that ultimately forced IBM to rethink some of its core computer strategies.

Of the firms that challenged IBM, electronics giants GE and RCA were the largest, with revenues far exceeding the computer industry market leader, but in a way their size worked against them.  Since neither computers nor office equipment were among either firm’s core competences, nor integral to either firm’s future success, they never fully committed to the business and therefore never experienced real success.  Unsurprisingly, they were the first of the seven dwarfs to finally call it quits, with GE selling off its computer business in 1970 and RCA following suit in 1971.  Burroughs and NCR, the companies that had long dominated the adding machine and cash register businesses respectively, both entered the market in 1956 after buying out a small startup firm — ElectroData and Computer Research Corporation respectively — and managed to remain relevant by creating computers specifically tailored to their preexisting core customers, the banking sector for Burroughs and the retail sector for NCR.  Sperry Rand ended up serving niche markets as well after failing to compete effectively with IBM, experiencing success in fields such as airline reservation systems.  The biggest threat to IBM’s dominance in this period came from two Minnesota companies: Honeywell and Control Data Corporation (CDC).

Unlike the majority of the companies that persisted in the computer industry, Honeywell came not from the office machine business, but from the electronic control industry.  In 1883, a man named Albert Butz created a device called the “damper flapper” that would sense when a house was becoming cold and cause the flapper on a coal furnace to rise, thus fanning the flames and warming the house.  Butz established a company that did business under a variety of names over the next few years to market his innovation, but he had no particular acumen for business.  In 1891, William Sweatt took over the company and increased sales through door-to-door selling and direct marketing.  In 1909 the company introduced the first controlled thermostat, sold as the “Minnesota Regulator,” and in 1912 Sweatt changed the name of the company to the Minnesota Heat Regulator Company.  In 1927, a rival firm, Mark C. Honeywell’s Honeywell Heating Specialty Company of Wabash, Indiana, bought out Minnesota Heat Regulator to form the Honeywell-Minneapolis Regulator Company with Honeywell as President and Sweatt as chairman.  The company continued to expand through acquisitions over the next decade and weathered the Great Depression relatively unscathed.

In 1941, Harold Sweatt, who had succeeded Honeywell as president in 1934, parlayed his company’s expertise in precision measuring devices into several lucrative contracts with the United States military, emerging from World War II as a major defense contractor.  Therefore, the company was approached by fellow defense contractor Raytheon to establish a joint computer subsidiary in 1954.  Incorporated as Datamatic Corporation the next year, the computer company became a wholly-owned subsidiary of Honeywell in 1957 when Raytheon followed so many other companies in exiting the computer industry.  Honeywell delivered its first mainframe, the Datamatic 1000, that same year, but the computer relied on vacuum tubes and was therefore already obsolete by the time it hit the market.  Honeywell temporarily withdrew from the business and went back to the drawing board.  After IBM debuted the 1401, Honeywell triumphantly returned to the business with the H200, which not only took advantage of the latest technology to outperform the 1401 at a comparable price, but also sported full compatibility with IBM’s wildly successful machine, meaning companies could transfer their existing 1401 programs without needing to make any adjustments.  Announced in 1963, the H200 threatened IBM’s control of the low-end of the mainframe market.

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William Norris (l) and Seymour Cray, the principle architects of the Control Data Corporation

While Honeywell chipped away at IBM from the bottom of the market, computer startup Control Data Corporation (CDC) — the brainchild of William Norris — threatened to do the same from the top.  Born in Red Cloud, Nebraska, and raised on a farm, Norris became an electronics enthusiast at an early age, building mail-order radio kits and becoming a ham radio operator.  After graduating from the University of Nebraska in 1932 with a degree in electrical engineering, Norris was forced to work on the family farm for two years due to a lack of jobs during the Depression before joining Westinghouse in 1934 to work in the sales department of the company’s x-ray division.  Norris began doing work for the Navy’s Bureau of Ordinance as a civilian in 1940 and enjoyed the work so much that he joined the Naval Reserve and was called to duty at the end of 1941 at the rank of lieutenant commander.  Norris served as part of the CSAW codebreaking operation and became one of the principle advocates for and co-founders of Engineering Research Associates after the war.  By 1957, Norris was feeling stifled by the corporate environment at ERA parent company Sperry Rand, so he left to establish CDC in St. Paul, Minnesota.

Norris provided the business acumen at CDC, but the company’s technical genius was a fellow engineer named Seymour Cray.  Born in Chippewa Falls, Wisconsin, Cray entered the Navy directly after graduating from high school in 1943, serving first as a radio operator in Europe before being transferred to the Pacific theater to participate in code-breaking activities.  After the war, Cray attended the University of Minnesota, graduated with an electrical engineering degree in 1949, and went to work for ERA in 1951.  Cray immediately made his mark by leading the design of the UNIVAC 1103, one of the first commercially successful scientific computers, and soon gained a reputation as an engineering genius able to create simple, yet fast computer designs.  In 1957, Cray and several other engineers followed Norris to CDC.

Unlike some of the more conservative engineers at IBM, Cray understood the significance of the transistor immediately and worked to quickly incorporate it into his computer designs.  The result was CDC’s first computer, the 1604, which was first sold in 1960 and significantly outperformed IBM’s scientific computers.  Armed with Cray’s expertise in computer design Norris decided to concentrate on building the fastest computers possible and selling them to the scientific and military-industrial communities where IBM’s sales force exerted relatively little influence.  As IBM’s Project Stretch floundered — never meeting its performance targets after being released as the IBM 7030 in 1961 — Cray moved forward with his plans to build the fastest computer yet designed.  Released as the CDC 6600 in 1964, Cray’s machine could perform an astounding three million operations per second, three times as many as the 7030 and more than any other machine would be able to perform until 1969, when another CDC machine, the 7600, outpaced it.  Dubbed a supercomputer, the 6600 became the flagship product of a series of high-speed scientific computers that IBM proved unable to match.  While Big Blue was ultimately forced to cede the top of the market to CDC, however, by the time the 6600 launched the company was in the final phases of a product line that would extend the company’s dominance over the mainframe business and ensure competitors like CDC and Honeywell would be limited to only niche markets.

System/360

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The System/360 family of computers, which extended IBM’s dominance of the mainframe market through the end of the 1960s.

 When Tom Watson Jr. finally assumed full control of IBM from his father, he inherited a corporate structure designed to collect as much power and authority in the hands of the CEO as possible.  Unlike Watson Sr., Watson Jr. preferred decentralized management with a small circle of trusted subordinates granted the authority to oversee the day-to-day operation of IBM’s diverse business activities.  Therefore Watson overhauled the company in November 1956, paring down the number of executives reporting directly to him from seventeen to just five, each of whom oversaw multiple divisions with the new title of “group executive.”  He also formed a Corporate Management Committee consisting of himself and the five group executives to make and execute high-level decisions.  While the responsibilities of individual group executives would change from time to time, this new management structure remained intact for decades.

Foremost among Watson’s new group executives was a vice president named Vin Learson.  A native of Boston, Massachusettes, T. Vincent Learson graduated from Harvard with a degree in mathematics in 1935 and joined IBM as a salesman, where he quickly distinguished himself. In 1949, Learson was named sales manager of IBM’s Electric Accounting Machine (EAM) Division, and he rose to general sales manager in 1953.  In April 1954, Tom Watson, Jr. named Learson the director of Electronic Data Processing Machines with a mandate to solidify IBM’s new electronic computer business.  After guiding early sales of the 702 computer and establishing an advanced technology group to incorporate core memory and other improvements into the 704 and 705 computers, Learson received another promotion to vice president of sales for the entire company before the end of the year.  During Watson’s 1956 reorganization, he named Learson group executive of the Military Products, Time Equipment, and Special Engineering Products divisions.

During the reorganization, IBM’s entire computer business fell under the new Data Processing Division overseen by group executive L.H. LaMotte.  As IBM’s computer business continued to grow and diversify in the late 1950s, however, it grew too large and unwieldy to contain within a single division, so in 1959 Watson split the operation in two by creating the Data Systems Division in Poughkeepsie, responsible for large systems, and the General Products Division, which took charge of small systems like the 650 and 1401 and incorporated IBM’s other laboratories in Endicott, San Jose, Burlington, Vermot, and Rochester, Minnesota.  Watson then placed these two divisions, along with a new Advanced Systems Development Division, under Learson’s control, believing him to be the only executive capable of propelling IBM’s computer business forward.

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Vin Learson, the IBM executive who spearheaded the development of the System/360

When Learson inherited the Data Systems and General Products Divisions, he was thrust into the middle of an all out war for control of IBM’s computer business.  The Poughkeepsie Laboratory had been established specifically to exploit electronics after World War II and prided itself on being at the cutting edge of IBM’s technology.  The Endicott Laboratory, the oldest R&D division at the company, had often been looked down upon for clinging to older technology, yet by producing both the 650 and the 1401, Endicott was responsible for the majority of IBM’s success in the computer realm.  By 1960, both divisions were looking to update their product lines with more advanced machines.  That September, Endicott announced the 1410, an update to the 1401 that maintained backwards compatibility.  At the same time, Poughkeepsie was hard at work on a new series of four compatible machines designed to serve a variety of business and scientific customers under the 8000 series designation.  Learson, however, wanted to unify the product line from the very low end represented by the 1401 to the extreme high end represented by the 7030 and the forthcoming 8000 computers.  By achieving full compatibility in this manner, IBM could take advantage of economies of scale to drive down the price of individual computer components and software development while also standardizing peripheral devices and streamlining the sales and service organizations that would no longer have to learn multiple systems.  While Learson’s plan was sound in theory, however, forcing two organizations that prided themselves on their independence and competed with each other fiercely to work together would not be easy.

Learson relied heavily on his power as a group executive to transfer employees across both divisions to achieve project unity.  First, he moved Bob Evans, who had been the engineering manager for the 1401 and 1410, from Endicott to Poughkeepsie as the group’s new systems development manager.  Already a big proponent of compatibility, Evans unsurprisingly recommended that the 8000 project be cancelled and a cohesive product line spanning both divisions be initiated in its place.  The lead designer of the 8000 series, Frederick Brooks, vigorously opposed this move, so Learson replaced Brooks’s boss with another ally, Jerrier Haddad, who had led the design of the 701 and recently served as the head of Advanced Systems Development.  Haddad sided with Evans and terminated the 8000 project in May 1961.  Strong resistance remained in some circles, however, most notably from General Products Division head John Haanstra, so in October 1961, Learson assembled a task group called SPREAD (Systems, Planning, Review, Engineering, and Development) consisting of thirteen senior engineering and marketing managers to determine a long-term strategy for IBM’s data processing line.

On December 28, the SPREAD group delivered its final proposal to the executive management committee.  In it, they outlined a series of five compatible processors representing a 200-fold range in performance.  Rather than incorporate the new integrated circuit, the group proposed a proprietary IBM design called Solid Logic Technology (SLT), in which the discrete components of the circuit were mounted on a single ceramic substrate, but were not fully integrated.  By combining the five processors with SLT circuits and core memories of varying speeds, nineteen computer configurations would be possible that would all be fully compatible and interchangeable and could be hooked up to 40 different peripheral devices.  Furthermore, after surveying the needs of business and scientific customers, the SPREAD group realized that other than floating-point capability for scientific calculations, the needs of both customers were nearly identical, so they chose to unify the scientific and business lines rather then market different models for each.  Codenamed the New Product Line (NPL), the SPREAD proposal would allow IBM customers to buy a computer that met their current needs and then easily upgrade or swap components as their needs changed over time at a fraction of the cost of a new system without having to rewrite all their software or replace their peripheral devices.  While not everyone was convinced by the presentation, Watson ultimately authorized the NPL project.

The NPL project was perhaps the largest civilian R&D operation ever undertaken to that point.  Development costs alone were $500 million, and when tooling, manufacturing, and other expenses were taken into account, the cost was far higher.  Design of the five processor models was spread over three facilities, with Poughkeepsie developing the three high-end systems, Endicott developing the lowest-end system, and a facility in Hursley, England, developing the other system.  At the time, IBM manufactured all its own components as well, so additional facilities were charged with churning out SLT circuits, core memories, and storage systems.  To assemble all the systems, IBM invested in six new factories.  In all, IBM spent nearly $5 billion to bring the NPL to market.

To facilitate the completion of the project, Watson elevated two executives to new high level positions: Vin Learson assumed the new role of senior vice president of sales, and Watson’s younger brother, Arthur, who for years had run IBM’s international arm, the World Trade Corporation, was named senior vice president of research, development, and manufacturing.  This new role was intended to groom the younger Watson to assume the presidency of IBM one day, but the magnitude of the NPL project coupled with Watson’s inexperience in R&D and manufacturing ultimately overwhelmed him.  As the project fell further and further behind schedule, Learson ultimately had to replace Arthur Watson in order to see the project through to completion.  Therefore, it was Learson who assumed the presidency of IBM in 1966 while Watson assumed the new and largely honorary role of vice chairman.  His failure to shepherd the NPL project ended any hope Arthur Watson had of continuing the Watson family legacy of running IBM, and he ultimately left the company in 1970 to serve as the United States ambassador to France.

In late 1963, IBM began planning the announcement of its new product line,  which now went by the the name System/360 — a name chosen because it represented all the points of a compass and emphasized that the product line would fill the needs of all computer users.  Even at this late date, however, acceptance of System/360 within IBM was not assured.  John Haanstra continued to push for an SLT upgrade to the existing 1401 line to satisfy low-end users, which other managers feared would serve to perpetuate the incompatibility problem plaguing IBM’s existing product line.  Furthermore, IBM executives struggled over whether to announce all the models at once and thus risk a significant drop in orders for older systems during the transition period, or phase in each model over the course of several years.  All debate ended when Honeywell announced the H200.  Faced with losing customers to more advanced computers fully compatible with IBM’s existing line,  Watson decided in March 1964 to scrap the improved 1401 and launch the entire 360 product line at once.

On April 7, 1964, IBM held press conferences in sixty-three cities across fourteen countries to announce the System/360 to the world.  Demand soon far exceeded supply as within the first two years that System/360 was on the market IBM was only able to fill roughly 4,500 of 9,000 orders.  Headcount at the company rose rapidly as IBM rushed to bring new factories online in response.  In 1965, when actual shipments of the System/360 were just beginning, IBM controlled 65 percent of the computer market and had revenues of $2.5 billion.  By 1967, as IBM ramped up to meet insatiable 360 demand, the company employed nearly a quarter of a million people and raked in $5 billion in revenues.  By 1970, IBM had an install base of 35,000 computers and held an ironclad grip on the mainframe industry with a marketshare between seventy and eighty percent; the next year company earnings surpassed $1 billion for the first time.

As batch processing mainframes, the System/360 line and its competitors did not serve as computer game platforms or introduce technology that brought the world closer to a viable video game industry.  System/360 did, however, firmly establish the computer within corporate America and solidified IBM’s place as a computing superpower while facilitating the continuing spread of computing resources and the evolution of computer technology.  Ultimately, this process would culminate in a commercial video game industry in the early 1970s.